Topic: Government and Politics

Equality Isn’t Natural

A New York Times article from the day after Thanksgiving falls into a familiar trap of assuming that equality – among people, among regions, among growth rates, etc. – is a natural condition, so that any deviation from equality is not only worthy of note but a “problem.” Reporter Ian Austen writes:

But [Canadian finance minister Jim] Flaherty did not address a much broader economic problem that has been troubling people who follow the nation’s economy. Although Canada’s economy as a whole is expected to grow by a healthy 2.8 percent this year, there is an expanding gulf between the eastern and western halves of the country.

Indeed, in the past year economic growth has been stronger in oil-rich Alberta than in industrial Ontario, the largest province. Alberta remains the wealthiest Canadian province. But Ontario is not far behind, and it’s wealthier than the other western provinces. The main point is that it would be absurd to expect Canada’s provinces to show the same growth rate each and every year. Yet the Times calls disparity in annual growth rates ”a much broader economic problem that has been troubling people.”

The reality is that nothing is equal. The world is diverse and complex. Different provinces (or states or nations) have different resource endowments, different histories, different policies. Why would we expect them to have the same outcomes, annually or otherwise? The same is true for individuals; we’re all different in infinite ways, so it’s crazy to expect us to end up with the same incomes or assets or accomplishments. And crazy to think that Harvard or the NBA or the Wal-Mart workforce would “look like America.”

Footnote: Google isn’t helping any. When I searched for the New York Times headline “In Canada’s Economic Divide, West Surges While East Struggles,” Google responded:

Did you mean: In Canada’s Economic Divide, West Surges When East Struggles  

Talking to Bad Guys, Part II

Back in July, as the war in Lebanon raged, I questioned the president’s unwillingness to deal directly with Syria and Iran on issues of mutual concern in the Middle East. The issue has resurfaced in the past few days as the Iraq Study Group is expected to recommend that the Bush administration negotiate with Iraq’s neighborsall of Iraq’s neighbors – in an attempt to rein in the escalating civil war in the country.

For now, President Bush appears firm in his opposition to direct talks with either Iran or Syria. He is encouraged in this posture by neoconservatives who believe that talking to either country is tantamount to a reward for bad behavior. A related argument is that negotiations afford respect and legitimacy to regimes that deserve neither.

I have never understood this position. Ronald Reagan, the supposed patron saint of neoconservative hawks, was never afraid to negotiate with our enemies. Indeed, his willingness to reach out, for example, to the leaders of the Soviet Union engendered considerable criticism among neoconservatives. They were equally skeptical of many of his policies in the Middle East and Asia.

As Stefan Halper and Jonathan Clarke write in their book America Alone: The Neo-Conservatives and the Global Order:

Reagan had presented the conflicts of international politics in essentially moral terms, and for this reason he looked like the president whom neo-conservatives had waited for. But as his declaratory policies gradually moved toward pragmatism, those events that seemed to be disasters in foreign policy to neo-conservatives appeared as major achievements to the moderates who were making the key decisions in the administration.

One of those moderates was James Baker. The New Republic’s Martin Peretz urges us to ”Ignore James Baker,” and AEI’s Michael Ledeen accuses Baker et al of “active appeasement.” It is easier to understand Baker’s ability to shrug off such neoconservative sniping when we recall what he learned from the master communicator and strategist. You can almost see a Reaganesque gleam in his eye when Baker explains “it’s not appeasement to talk to your enemies.”

It may be impossible to avert Iraq’s slide into full-scale civil war. But Iraq’s neighbors surely do not want to see the chaos expand over Iraq’s borders, and threaten their own peace and security. That seems reason enough to want to reach out to others in the region, including those countries we don’t like very much.

Is the White House Worth More than a Wii Console?

On government radio Friday, a panel of journalists were bemoaning the high cost of politics. The two leading candidates for president in 2008 might end up spending $500 million each — a billion-dollar election, the pundits wailed in italicized outrage.

It would be nice if politicians and special interests didn’t think it was worth half a billion dollars to gain the most powerful office in the world. But it is. The president not only has the power to bomb people, invade countries, hold citizens in jail without a lawyer, burn down churches, and strongly influence policy on issues ranging from abortion to youth unemployment — all of which might cause opinionated citizens to contribute money to political campaigns — he or she also plays a huge role in allocating $2.8 trillion a year of federal spending to favored clients, not to mention tweaking government regulation to help or hurt a candidate’s friends.

In Saturday’s New York Times, lefty journalist Tom Edsall gloats over the Republican-leaning interest groups who can expect to bear the brunt of Democratic wrath:

Topping the Democratic hit list are the G.O.P.’s closest corporate allies, including the oil and gas industry, student loan companies, and the pharmaceutical manufacturers known as Big Pharma. The list is much
longer… .

In many cases, Democrats can exact reprisal against companies that financed the Republican revolution and won special legislative favors in return … with the same avoidance of public scrutiny.

A billion dollars for the presidency? Coincidentally, that’s just about what Nintendo will take in on the 4 million units of Wii it intends to sell in the last five weeks of 2006.

Genetic Engineering: The Eugenics of Tomorrow?

I received a request today to comment on the possible dangers of genetic engineering. Michael Crichton’s latest book, Next, explores some of the horrors eugenics could bring, such as the mixing of animal and human DNA. Here are some of my thoughts:

Isaac Asimov, another great science fiction writer, said, “If knowledge can create problems, it is not through ignorance that we can solve them.” 

It is impossible to estimate, let alone know, the balance of good or evil that scientific knowledge will bring. In everything humans do, they are daunted by the principle of unintended consequences, but the answer is not to stop looking for answers. The pursuit of knowledge is the only true path to improving the human condition, yet there are almost as many views on what knowledge should be pursued as there are pursuers. The answer is to proceed cautiously, allowing small steps and small corrections, so with time the truth will show itself.

The best way to ensure caution is to keep government out of the pursuit of knowledge, whether scientific or otherwise. In the private sector, endeavors are supported only by those who believe they are ethical and worthwhile. The more extreme and outlandish the idea, the less likely it is to receive support. When mistakes are made on a small scale, they have small scale effects. Governments, which are run by individuals no less fallible than the rest of humanity, are influenced by bad ideas as much as by good ones. But, unlike the individual mad scientist with a small group of supporters, government mistakes loom larger than life — its policies affect the lives of whole populations.

In the beginning of the 20th century, eugenics was touted as the answer to all of humanity’s problems. Great scientists such as Alexander Graham Bell and Carol Campbell Brigham at first supported eugenics, as did every U.S. president between 1901 and 1933. Many people all over the world worked hard both in their private lives and through government policy to implement its principles. 

Individuals had their own ideas about improving the human gene pool by marrying only superior specimens of humanity. If the eugenics movement had resulted in nothing more than discriminatory marriage practices, the word “eugenics” wouldn’t represent anything more than a silly fad. The reason eugenics has become almost synonymous with mass sterilizations and genocide is because governments got involved.

Genetic engineering may be the answer to many of humanity’s problems or it may be the next eugenics. Let’s keep government out of science and let the advances and mistakes take place in small steps so that humanity can learn from scientific successes and failures on a realistic scale. Only with government intervention do potential mishaps become disastrous tragedies.

Debbie Hammons for President!

I’m not kidding. Ms. Hammons, a Democratic state legislator from Worland, WY, this week made a bit of a splash in fly-over country by questioning a $2.2 million annual tax break for investors considering building a type of coal-gasification electricity plant in her state. 

“When is it an incentive and when is it a subsidy?” she asked. ”What if we create a false sense of commercialization?” 

It would appear from the press account that nobody there seems to have any idea exactly what she’s driving at.

Anyway, good questions, Rep. Hammons. Are you sure you’re in the right line of work?    

Nordhaus vs. Stern

When the Stern Review on the Economics of Climate Change was released a few weeks back, I got a bevy of calls from reporters asking what I thought of it.  Of course, it’s hard to say anything intelligent about a 700+ page report that was released only hours earlier, so all I could do was quickly peruse the executive summary, speed-glance through the most pertinent sounding chapters, and opine like the wind.  While I thought I did a reasonable enough job summarizing the main issues at hand given the circumstances, the experience demonstrates a fundamental problem with journalism that is unlikely to ever go away.  To wit, reporters demand an immediate reaction when some new study or paper comes out, and the news cycle doesn’t last long enough to allow for particularly informed and/or careful review of many of these said studies or papers.  By the time that informed and careful response is ready, reporters have moved on to something else.  The deck is stacked in favor of the authors, who seldom have to defend against anything but superficial or relatively poorly-informed criticism in the popular press.

One of the things I was most interested in at the time was what economists who specialized in the economics of climate change had to say about the Stern Review.  The leading academic on this subject is William Nordhaus, an economist at Yale (another is Prof. Robert Mendelsohn at the same university.  Prof. Mendelsohn’s response to the Stern Review will be published in the next issue of Cato’s Regulation magazine).  When I emailed Prof. Nordhaus about the Stern Review, I got a rather short and vague reply.  Nicholas Stern is a good economist, Prof. Nordhaus said, and the report looked like a serious undertaking; the right questions were asked and the answers provided looked interesting.  Beyond that, little else.  Reporters I talked to told me this is what he had sent them as well.  Apparently, Nordhaus was not ready to jump into the discussion yet.

Reporters moved on, but Nordhaus did not.  Over the next several weeks, he apparently went to work on the document and by last week he was ready to offer up some thoughts.  Despite the fact that this highly credentialed economist finds that ”it is impossible for mortals outside the group that did the modeling to understand the detailed results of the Review,” his analysis is illuminating.  While no reporter is likely to write about Nordhaus’ take on Stern now, it is worth your time if you wonder whether an economic disaster of epic proportions really awaits us lest we do something drastic to reduce greenhouse gas emissions.  The answer; probably not.

The gist of the matter is this:  Academic economists who specialize in climate change generally agree that warming - if the “consensus” of scientific opinion as reported by the Intergovernmental Panel on Climate Change is correct - will only reduce global GDP by 0-3% per year and that those costs won’t be evident until well into the future.  The Stern Review, however, reports that losses may total as much as 20% of global GDP if warming is left unaddressed.  Why the disagreement?

While there are a number of issues in play, the main thing explaining the differing calculations is the extent to which future warming is discounted into the present.  Most economist use discount rates ranging from 3-5% when trying to put a price tag on future damages.  Stern argues that this is ethically indefensible - losses tomorrow, or even 200 years from tomorrow, are just as worth worrying about as losses today.  If you apply a 0.1% discount rate (Stern’s figure) rather than, say, a 5% discount rate (my suggestion, which matches the return on Treasury bills - or, put another way, the figure people apply themselves when considering the value of money today versus the value of money tomorrow) or a 3% discount rate (Nordhaus’s figure, although he is happy to confess that other figures are perfectly defensible), then you’re going to get a huge price tag for global warming.  Apply higher discount rates, and the price tag deflates to such an extent that it’s impossible to justify spending anything near what Stern wants us to spend to reduce greenhouse gas emissions.

Is Stern right to argue that we are morally required to treat losses to future generations in exactly the same manner that we treat losses to present generations?  Not necessarily:

Quite another ethical stance would be to hold that each generation should leave at least as much total societal capital (tangible, natural, human, and technological) as it inherited.  This would admit a wide array of social discount rates.  A third alternative would be a Rawlsian perspective that societies should maximize the economic well-being of the poorest generation.  Under this policy, current consumption would increase sharply to reflect likely future improvements in productivity.  Yet a fourth perspective would be a precautionary (minimax) principle in which societies maximize the minimum consumption along the riskiest path; this might involve stockpiling vaccines, grain, oil, and water in contemplation of possible plagues and famines.  Without choosing among these positions, it should be clear that alternative perspectives are possible.

Note that if you are an admirer of political philosopher John Rawls - as most of the Left most definitely is - then you should probably embrace the use of a high discount rate. 

Anyway, what if we use Stern’s discount rate regardless?  Nordhaus thinks it leads to palpably ridiculous policy prescriptions:

Suppose that scientists discover that a wrinkle in the climatic system will cause damages equal to 0.01 percent of [global] output starting in 2200 and continuing at that rate thereafter.  How large a one-time investment would be justified today to remove the wrinkle starting after two centuries?  The answer is that a payment of 15 percent of [the] world’s consumption today (approximately $7 trillion) would pass the [Stern] Review’s cost-benefit test.  This seems completely absurd.

Still happy with a near-zero discount rate?  What if we applied that philosophy in other policy arenas where the same issue arises - like, say, foreign policy?  Nordhaus echoes an argument I made myself several years ago:

While this feature of low discounting might appear benign in climate-change policy, we could imagine other areas where the implications could themselves be dangerous.  Imagine the preventative war strategies that might be devised with low social discount rates.  Countries might start wars today because of the possibility of nuclear proliferation a century ahead; or because of a potential adverse shift in the balance of power two centuries ahead; or because of speculative futuristic technologies three centuries ahead.  It is not clear how long the globe could long survive the calculations and machinations of zero-discount rate military powers.

Nordhaus’s commentary on Stern is only 21 pages double-spaced, and there’s more intellectual goodies therein.  Read it.  Learn it.  Live it.   

New Mexico: Land of Dependence

Found on a New Mexico state web site…

My father-in-law runs the Santa Fe chapter of Habitat for Humanity, a voluntary charity that measures success in terms of how many people it helps to achieve financial independence.  Odd that the state government appears to take pride in doing the opposite. 

The Free Lunch Project may have found its new home.  Crescit eundo, indeed.